Spanish Stocks Rallied in 2023

Surging by the biggest margin since 2009, Spain's top 35 companies saw an impressive aggregate growth of 22% in 2023. Reclaiming pre-pandemic levels, the Madrid IBEX 35 stock index reflected this strong performance.

The main reasons behind the rally include the quick recovery of Spain's COVID-stricken economy. As travel restrictions eased, the nation's tourism-dependent economy saw a noticeable rebound, with employment soaring to a record-breaking 21.2 million and unemployment dipping to 11.8%.

Robust consumer confidence boosted retail sales by 5%, while the ever-expanding private services sector ensured the PMI remained above the critical 50-point threshold throughout.

Leading the IBEX 35's charge, retail giant Inditex saw an outstanding 57% upsurge, its second-strongest annual growth ever. Other notable performers included construction giant ACS, which rallied by 48%, along with banking giants BBVA and Santander, which gained 45% and 35%, respectively.

While there is anticipation about whether the market can maintain its momentum in 2024, Spanish equities remain reasonably priced, trading at a forward price-to-earnings ratio roughly 30% below historical norms.

Although GDP growth is projected to slow slightly from 2023's robust 2.4% to 1.7% in 2024, Spain's resilient economy is poised for recovery, with expectations of a 2.0% growth rate in 2025.

As the Spanish economy remains tethered to the global economic climate, the performance of Spanish equities in 2024 will depend, to a large degree, on the broader dynamics of international financial markets.